Correlation Between Northern Star and Vulcan Steel
Can any of the company-specific risk be diversified away by investing in both Northern Star and Vulcan Steel at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Northern Star and Vulcan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Star Resources and Vulcan Steel, you can compare the effects of market volatilities on Northern Star and Vulcan Steel and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Northern Star with a short position of Vulcan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Vulcan Steel.
Diversification Opportunities for Northern Star and Vulcan Steel
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Northern and Vulcan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Vulcan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Steel and Northern Star is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Northern Star Resources are associated (or correlated) with Vulcan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Steel has no effect on the direction of Northern Star i.e., Northern Star and Vulcan Steel go up and down completely randomly.
Pair Corralation between Northern Star and Vulcan Steel
Assuming the 90 days trading horizon Northern Star Resources is expected to generate 0.78 times more return on investment than Vulcan Steel. However, Northern Star Resources is 1.29 times less risky than Vulcan Steel. It trades about 0.0 of its potential returns per unit of risk. Vulcan Steel is currently generating about -0.01 per unit of risk. If you would invest 1,728 in Northern Star Resources on August 29, 2024 and sell it today you would lose (10.00) from holding Northern Star Resources or give up 0.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Star Resources vs. Vulcan Steel
Performance |
| Timeline |
| Northern Star Resources |
| Vulcan Steel |
Northern Star and Vulcan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and Vulcan Steel
The main advantage of trading using opposite Northern Star and Vulcan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, Vulcan Steel can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vulcan Steel will offset losses from the drop in Vulcan Steel's long position.| Northern Star vs. Australian Unity Office | Northern Star vs. Centuria Industrial Reit | Northern Star vs. Green Technology Metals | Northern Star vs. Computershare |
| Vulcan Steel vs. Retail Food Group | Vulcan Steel vs. Argo Investments | Vulcan Steel vs. MFF Capital Investments | Vulcan Steel vs. A1 Investments Resources |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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